Twitter value could reach $11 billion in public offering

SAN FRANCISCO -- Taking another step toward the most highly anticipated Wall Street debut since Facebook, Twitter for the first time Thursday told investors how much an initial public offering could value the company -- at nearly $11 billion -- and said it hopes to raise up to $1.4 billion from the IPO, significantly more than it had projected.

In a move that is expected to take it rapidly to a public offering in early November, the social networking company said it will sell its stock at $17 to $20 a share. At the top of that range, the company's value would be about $10.9 billion.
The company's IPO plans come amid renewed enthusiasm on Wall Street for tech startups and will, again, make billionaires and millionaires out of early investors and employees in another remarkable Silicon Valley success story.
At $20 a share, co-founders Evan Williams and Jack Dorsey could see their stakes valued at more than $1 billion and $469 million, respectively.
With disclosure of the price range out of the way, the San Francisco-based microblogging and social networking company -- which has yet to make a profit -- will take to the road to make presentations to institutional investors.
The company said it will initially sell 70 million shares, which at $20 each would give the company a $1.4 billion cash hoard, more than the $1 billion it earlier targeted. An extra 10.5 million shares could be sold depending on how well the company does in trading.
The final offering price is expected to be set by the company in early November, with trading beginning the following day on the New York Stock Exchange under the ticker TWTR.
Analysts said the price should draw flocks of institutional buyers.
"It's a lower price than expected and lower than the private shares markets indicated, which means it is highly likely to be oversubscribed," said Michael Pachter, managing director of equity research at Wedbush Securities in Long Angeles,
But Rob Enderle, industry analyst and founder of the Enderle Group in San Jose, warned that the price may entice institutional investors but be too rich for the average investor.
"It's a lot of money for a company that pretty much is operating in the red right now," Enderle said. "You need to be cautious. It's one you want to watch from a distance."
Twitter warned in its filing that revenue growth "will slow in the future," which could spook investors who care more about big growth than profitability.
In the first nine months of this year, Twitter lost $133.9 million while generating $422.2 million in revenue, both numbers reflecting large increases from the same period last year, when losses totaled $70.7 million on revenue of $204.7 million.
Twitter will be listed on the NYSE rather than the tech-heavy Nasdaq, where social networking company Facebook's IPO on May 18, 2012, was marred by computer problems.
That public offering -- at $38 a share -- valued Facebook at $81 billion, but the share price later plummeted to less than $20. Those who held on have been rewarded. Facebook closed at $52.45 Thursday.
Twitter's target price is not fixed in concrete, and could change in future filings before it starts selling shares.
From a tiny service that was considered a novelty when it launched in 2006, Twitter has grown to more than 200 million active monthly users and coined the verb "to tweet" along the way.
The self-proclaimed "global platform for public self-expression" publishes more than 500 million tweets per day and has played prominent roles in such events as the Arab Spring and the tsunami in Japan.
Dick Costolo took the reins as Twitter's chief executive in 2010 and has increased hiring, almost doubling its workforce in the past year to more than 2,000. Like Facebook, Twitter generates its revenue from advertisements, with businesses paying to promote themselves in users' personal timelines.
The company has increased revenue in the past year by opening its ad platform to third-party software; improving ad targeting with the use of cookies and data-mining; partnering with WPP, the world's largest advertising agency; and recently acquiring MoPub, a mobile advertising company that it plans to use to offer advertisers real-time auctions for purchasing ads.
Early investors, executives and founders plan to keep their stakes, which will account for 51.4 percent of the outstanding shares after the offering, according to Thursday's filing. After the IPO, the largest stake in Twitter will belong to Rizvi Traverse, who runs a New York-based private equity firm and has been buying up shares of Twitter on private markets ahead of the IPO; he will own 15.6 percent of the company after shares are sold. Co-founder Williams will have the next largest stake, at 10.4 percent.

Contact Pete Carey at 408-920-5419. Follow him at Twitter.com/petecarey.

WHO OWNS TWITTER STOCK

Twitter set the initial parameters for its initial public offering Thursday and revealed how much of the company early investors and executives are expected to hold after it sells its first batch of shares. Here are the top stakeholders, the number of shares and percentage of the company they are targeted to own after the IPO, which Twitter expects to command a per-share price of $17 to $20, valuing the company at up to $10.9 billion.
Rizvi Traverse, founder of private equity firm: 85,171,093 shares, 15.6 percent
Evan Williams, co-founder: 56,909,847 shares, 10.4 percent
JPMorgan, investment bank: 48,849,820, 9 percent
Spark Capital, venture capital: 32,414,224 shares, 6 percent
Benchmark Capital Partners and Peter Fenton, venture capital: 31,568,740, 5.8 percent
Union Square Ventures, venture capital: 27,838,992, 5.1 percent
DST Global, venture capital: 23,744,745, 4.4 percent
Jack Dorsey, co-founder: 23,453,017, 4.3 percent
Richard Costolo, CEO: 7,675,239, 1.4 percent

Source: Updated Twitter S-1 filing of Oct. 24. Totals include shares held by entities affiliated with named investors.